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Dollar Up, Investors’ Christmas Wish is for Omicron, Central Bank Clarity

Forex Dec 12, 2021 11:55PM ET
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© Reuters

By Gina Lee

Investing.com – The dollar was up on Monday morning in Asia, starting the week off quietly ahead of a slew of key central bank policy decisions, including from the U.S. Federal Reserve, throughout the week.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.12% to 96.190 by 11:49 PM ET (4:49 AM GMT).

The USD/JPY pair edged up 0.15% to 113.54.

The AUD/USD pair inched up 0.06% to 0.7175 while the NZD/USD pair inched down 0.01% to 0.6797.

The USD/CNY pair inched down 0.09% to 6.3625.

The GBP/USD pair edged down 0.16% to 1.3247, with the pound reacting to British Prime Minister Boris Johnson’s warning on Sunday that the U.K. faces a "tidal wave" of omicron COVID-19 cases, with two vaccine doses not enough to contain the variant.

Markets have been volatile since omicron was discovered, due to concerns about its impact on economic recovery. However, reports that the variant may not be as bad as feared saw investors retreat from safe-haven assets last week.

"All I want for Christmas is clarity," Barclays (LON:BARC) Barclays analysts titled a research note.

The Fed kicks off the central bank’s meetings on Wednesday, with six of the G10 central banks and a number of emerging-market central banks due to meet throughout the week.

"Central banks will need to strike a difficult balance between omicron-induced uncertainty and elevated inflation levels," said the Barclays note.

The Fed is expected to accelerate its asset tapering, and potentially speed up interest rate hikes. Investors now see a more than 50% chance of an interest rate hike by May 2022, according to the CME Group's (NASDAQ:CME) FedWatch program.

"The Fed meeting certainly could prove the catalyst for EUR/USD to break down to 1.10. Though investors may prefer to wait from the European Central Bank (ECB) the next day before chasing the move. USD/JPY could also be pressing 115 post-Fed," said ING analysts in a note.

The ECB, Bank of Japan, and the Bank of England will also hand down their policy decisions throughout the week.

Dollar Up, Investors’ Christmas Wish is for Omicron, Central Bank Clarity
 

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